I’m fortunate enough to sometimes talk to some new, or new-ish, military spouses. There’s so much to know about money in general, and money and the military can be particularly tricky. I usually have a limited amount of time, and I struggle to decide on the most important topics to discuss. I want to tell them everything that I wish I knew 20-plus years ago.
Here are some of the things I frequently include:
Learn, Learn, and Learn About Money
Military pay and benefits can seem complicated, but there are a world of resources to help you understand them. Installation family readiness centers offer classes on all sorts of topics. There are also organized spouse training programs like the Navy’s Compass program or Army Family Team Building.
In addition to base resources, the internet can help you learn just about anything you want to know. There are blogs like this, Facebook groups, and online forums for talking to other military family members.
Here are some key skills to know:
How to read a Leave and Earnings Statement (LES). It’s the military equivalent of a pay stub, and it explains all the pays, allowances, and deductions.
How bonuses get taxed
YOUR Retirement
Military spouses need their own retirement savings. Unfortunately, military spouses face career challenges, and that can make it hard to save for retirement. If you are working, be sure to contribute to any available tax-advantaged retirement plans like a 401(k). Whether you are working or not, contribute to an Individual Retirement Arrangement. If you’ve maxed out those options, consider starting a small business just to open a SEP or Simple IRA or Solo 401(k). It can be hard when you’re on a limited income, but strive to save at least a little bit each month.
Military spouses need their own retirement savings. Click To TweetSGLI and FSGLI
Be sure your spouse and you are both enrolled in the Servicemember’s Group Life Insurance (SGLI) and Family SGLI (FSGLI) programs. This life insurance is incredibly cheap. Not sure if your spouse is enrolled? Check their Leave and Earnings Statement (LES) to see if premiums are being deducted. You should also ask your spouse to check their details on the SGLI Online Enrollment System to verify that the right beneficiaries are listed.
Thrift Savings Plan
Encourage your spouse to start contributing to the Thrift Savings Plan (TSP) right now, and increase their contributions with each pay raise and promotion. The sooner he or she starts, the more they’ll be able to accumulate in that retirement account. And if they are in the Blended Retirement System, they’ll get matching funds from the government added to their account.
Taxes and Domicile
Military families have some special tax considerations, including the ability to maintain a state of legal residence (domicile) somewhere besides where you’re stationed. New spouses should understand how the Military Spouses Residency Relief Act (MSRRA) modifies the Servicemembers Civil Relief Act, and when it means they can retain an old state of legal residence, and when they can’t.
Mystery Money
At some point in your spouse’s military career, they will have a paycheck that is too large. Possibly even huge. You should assume that this is a mistake. Whatever you do, don’t spend it. Not even a teeny tiny bit. Move this money to a separate savings account until the military decides that it wants the money back.
Certainly, check the LES and try to figure out what has happened. Getting to the finance people quickly may prevent an overpayment on the next check. But just leave the money aside from your regular money. When the military decides that they want to be repaid, they could take entire paychecks to do so. You’ll be glad you didn’t buy a new sofa, or go to Vegas.
Servicemembers Civil Relief Act
The Servicemembers Civil Relief Act (SCRA) gives military service members and their spouses a variety of legal protections, including terminating a lease early due to deployment or Permanent Change of Station (PCS) move. You’ve got to understand the provisions in order to use them properly.
Transition Fund
I strongly encourage your spouse and you to consider building a transition fund for when they eventually leave the military. Whether they do four years and don’t re-enlist, or stay for a 30 year career, no one stays in the military forever. The transition is typically more expensive than people expect. I hear from way too many people who are panicking because they are leaving the military in two months, have no savings, and no plan.
Do some quick imaging about what you would need to support your family for six months, and start socking away a little money each paycheck. Your needs will change over time – adding a baby means that fund needs to grow more, but reaching eligibility for military retirement may mean it can shrink.
There are many other important things that military spouses need to learn, but these are the top ones I try to include. Is there something you would put on my list? What do you wish you had known?
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I wish I’d known about the things that would need to be purchased AFTER my first military move: light bulbs that broke in transit, curtains that didn’t fit, spices ruined by storage in hot warehouses, rugs for those odd spaces, little bits of this and that and it all added up. Yes, thrift shops and discount stores saved us some cash. After that first move I always planned for “moving money”.
So true Kathleen! There is always something, isn’t there?
After any pay increase, save and/or invest at least half of it each month. You will still be able to enjoy the increase in pay and at some point you will be really thankful you did it.
Good advice, Gerald!
Some states, Kentucky specifically, do not allow you to file individual state tax if your spouse has a different state of residency/domicile. And, even though your spouse is filing taxes for their own state of residency, they are required to be listed on your state tax form and it can effect your tax due to Kentucky. Which shouldn’t be a thing. If my spouse already paid taxes to one state, Kentucky shouldn’t be able to try and make us pay more taxes here. It was SO confusing. Not a single tax software program that I found would allow me to file properly either, so I HAD to find a tax professional to help. Which, when stationed as a recruiter, it is hard to find anyone honoring military discounts or providing free services for service members.
Manda, I’m not familiar with the specifics of Kentucky’s tax laws, but in most states you include all income (from both spouses) then the income that is not attributable to that state is taken back out, so that you’re not being double taxed. Kentucky has you back out the military income using the KY Schedule M. Is that not included in your tax return?
Just as an example, both my husband and I are Florida residents, but we also have to file in Maryland and Virginia because we own houses there. For each state, our entire income is listed, then the income that is attributable to other states is deducted, leaving on the income from that state to be taxed.
You may find these instructions helpful: http://min.midco.net/stateinstructions/www/kentucky.html
Thanks, Kate. That should help a lot.
I would add investing time to understanding GI Bill benefits, especially the requirements to transfer benefits.
Lots of people assume they will have transferred benefits, but didn’t go through the process to actually transfer them.